SEConomics

A Monthly Publication of the Economic Research and Training Department

SEC envisions over 800 SMEs listed at the PSE by 2024;

DTI and PSE accelerate the paving of ‘Road to IPO’
1. The Philippine Stock Exchange (PSE), in partnership with the Securities and Exchange
Commission (SEC) and the Department of Trade and Industry (DTI), organized “The Road
to IPO: SME Forum” on 16 and 17 September 2021. The virtual Forum aims to inform Small
and Medium Enterprises (SMEs) about the opportunities in accessing the stock market
and encourage them to raise capital through an initial public offering (IPO).

Zoom screen capture from Day 2 of the Road to IPO: SME Forum

2. Day 1 of the virtual Forum commenced with PSE President and CEO Ramon S. Monzon’s
welcome message and the keynote address from DTI Secretary Ramon M. Lopez.
Discussions about SMEs in the country and the IPO Listing Process followed. Mr. Shigehiro
Shinozaki, Senior Economist of the Asian Development Bank (ADB), talked about the
future of SMEs in PH and their potential to help the country achieve a more inclusive
growth. He highlighted that access to finance (especially through capital markets), is a
key not just to the SMEs’ growth, but also to their capability to survive and flourish during
and after this pandemic. MerryMart Consumer Corp. Chairman Edgar J. Sia II capped
Forum Day 1 with insights on the grocery retailer’s IPO journey.

3. Day 2 kicked off with a message from SEC Chairperson Emilio B. Aquino, who recognized
SMEs as backbone of the economy and expressed the Commission’s support to the
country’s SME development efforts. This was followed by SEC Markets and Securities
Regulation Department Director Vicente Graciano P. Felizmenio Jr.’s detailed
presentation about SEC IPO Registration. The Audit and Financial Preparation for an IPO,
Integral Role of the Legal Counsel in IPO Listing, and Understanding the Importance of
Investor Relations for SMEs were also covered in the discussions.

4. At present, only seven of the local bourse's 272 firms are part of the SME Board.
According to Chairperson Aquino, the SEC has taken on the challenge that in time for
its 88th year on 11 November 2024, at least 888 companies would have tapped the
capital market for their capital-raising activities.

5. The SEC Office for the Advancement of Strategic Investments in SMEs (OASIS), once
established, will collaborate with other government agencies, business sector, and think
tanks to facilitate SMEs’ access to the capital markets through developmental and
regulatory initiatives. The new Office seeks to shorten the registration procedures for
small businesses. It also aims to make capital-raising products easier to understand, as
well as persuade investment houses and financial institutions to develop "SME-friendly"
underwriting and/or advising programs.

Source: SEC, 2021; PSE, 2021a; DTI, 2021

SEPTEMBER 2021 | ISSUE NO. 9 1

SEConomics
A Monthly Publication of the Economic Research and Training Department

PH‘s first-ever retail onshore dollar bonds oversubscribed;

Total debt hit PHP11.64 Trillion as of August 2021

Finance Secretary 6. The first-ever Retail Onshore Dollar Bonds

(RDBs) auction in September remitted to the
Carlos G. Dominguez III Bureau of the Treasury (BTr) a total of USD1.60
Billion, or PHP80.91 Billion. The offer, which
urged the public to included five-year and ten-year tenors, was
invest in RDBs, calling it over four times oversubscribed compared to
the original USD400 Million target. The high
a “win-win” proposition demand can be linked to the widespread
distribution of RDB information and the
accessibility through local investing mobile
applications. The RDBs also offered higher-
than-market yields and a low minimum
investment of USD300 (about PHP15,000) (BTr,
2021a; BTr, 2021b; Nasdaq, 2021a; Business
World, 2021a).

7. The proceeds from the RDB's maiden sale will

be utilized for the country's top priorities, such
as financing the Philippines' pandemic
response initiatives on employment, MSMEs,
and healthcare system and assisting
pandemic-affected sectors (BTr, 2021 b).

8. As of end-August, the outstanding debt of

Photos Courtesy of BTr and Philippine News Agency the National Government (NG) has climbed
to a new record high of PHP11.64 Trillion, up
by PHP32.05 Billion or 0.28% month-on-month
Table 1. NG Outstanding Debt as of August 2021
(m-o-m) (Table 1). Year-on-year (y-o-y) and
(in PHP Millions) year-to-date (YTD) growth in NG outstanding
debt was 21.1% and 18.9%, respectively (BTR,
July August 2021c; BTR, 2021d).

Domestic Debt 8,119,598 8,220,304 9. Domestic debt grew to PHP8.22 Trillion in

Loans 540,156 540,156 August, up by 1.24% m-o-m, due to net
Debt Securities 7,579,442 7,680,148 government securities issuance. Domestic
debt accounted for 70.6% of overall debt at
the end of August (BTR, 2021c; BTR, 2021d).
External Debt* 3,490,867 3,422,215
Loans 1,471,994 1,471,188 10. External debt fell to PHP3.42 Trillion in August,
Debt Securities 2,018,873 1,951,027 down by 2.0% from July. The m-o-m decline
was preceded by the repayment of foreign
Total 11,610,465 11,642,519
loans and the reduced peso worth of
*Forex Rate Used: 50.223 (July) and 49.762 (August) liabilities due to foreign exchange
fluctuations (BTR, 2021c; BTR, 2021d).
Basic Source: Prepared by:
BTr 2021 SEC-ERTD

SEPTEMBER 2021 | ISSUE NO. 9 2

SEConomics
A Monthly Publication of the Economic Research and Training Department

Auctioned government securities fully awarded;

Treasury notes and bond trade volume dipped
11. BTr fully awarded all offered bills and bonds as published in the borrowing program
for September. Treasury bills (T-bills) fetched a total of PHP256.6 Billion bids for the
month, out of which, PHP62.0 Billion was accepted. The 1-year T-bill auctioned on
27 September was even upsized to PHP7.0 Billion from the planned PHP5.0 Billion to
accommodate the investors’ strong appetite for government securities (GS). BTR
also accepted a total of PHP175.0 Billion from the PHP364.8 Billion total Treasury bond
(T-bond) tenders (Table 2). Moreover, the TAP facility was utilized five times during
the month, adding PHP13.0 Billion to the total T-bond accepted amount. The
continued commitment to support PH recovery through accommodative monetary
policy has kept demand for GS steady (BTr, 2021e to 2021r; BSP, 2021a; Philippine
News Agency, 2021a; Philippine News Agency, 2021b).

12. Local fixed income (FI) yields were mixed but mostly inched up higher for the month.
The upward movement is driven by the easing of quarantine restrictions in the
capital region, the monetary board’s retention of the monetary policy settings, and
the higher-than-target September inflation forecast from BSP. Following these
factors, total FI trade volume waned during the month (Figure 1). Treasury notes (T-
notes) and retail treasury bonds (RTB) declined by 28.47% and 24.09%, respectively.
While the traded volume of T-bills and corporate securities (CS) increased, this was
not enough to counter the significant decrease in T-Notes and RTB trades which
together hold the largest share in total volume. September ended with a total FI
trade volume of PHP417.3 Billion, down by 8.61% m-o-m and 0.59% y-o-y (PDS, 2021a;
PDS, 2021b; BSP, 2021a; BSP, 2021b; Philippine News Agency, 2021c).

13. Food and specialty chemicals manufacturing firm D&L Industries, Inc. issued its
maiden 3- and 5-Year Fixed Rate Bond worth PHP5.0 Billion last 14 September. The
CS offering was well-received by investors and oversubscribed after receiving
PHP13.8 Billion worth of tenders. The listing is the 15th for the year, pushing the YTD
total listing to PHP155 Billion (PDS, 2021c).

Table 2. Bureau of the Treasury Auction Results Figure 1. PDEx Trade Volume Trends
as of September 2021 (in PHP Millions) (in PHP Billions)

Treasury Bills Treasury Notes

Category Tendered Accepted Rejected Retail Treasury Bonds Corporate Securities
500
4.1
Bills 256,557 62,000 194,557 5.8
400 122.5
93.0
Bonds* 394,581 187,950 206,631 300
187.4 134.1
200
Total
651,138 249,950 401,188 100 184.5
Issuance 142.6
0
* including TAP Facility August September
Basic Source: Prepared by: Basic Source: Prepared by:
BTr, 2021 SEC-ERTD PDS, 2021 SEC-ERTD

SEPTEMBER 2021 | ISSUE NO. 9 3

SEConomics
A Monthly Publication of the Economic Research and Training Department

Global growth remains uneven;

Growth forecast for Developing Asia revised
14. Global GDP growth is expected to reach 5.7% in 2021, according to the Organisation
for Economic Co-operation and Development (OECD) Economic Outlook released in
September (Figure 2). The current projection, while slightly lower than the earlier
forecast of 5.8%, already exceeds the 2.7% growth rate in 2019 (pre-pandemic). Despite
this year's rebound in global growth, output and employment gaps persist, particularly
in developing economies where vaccine access is limited and vaccination progress is
uneven.

15. OECD’s latest outlook for 2021 is comparable to forecasts of the International Monetary
Fund (6.0%) and World Bank (5.6%). The three organizations highlighted economic
prospects deviation across countries, depending on fiscal support and vaccination
progress (OECD, 2021; IMF, 2021; World Bank, 2021a).
Figure 2. World GDP Growth Forecast (% change from previous year)
10 2019 2020 2021f 2022f
Previous Latest Previous Latest
5
OECD1 2.7 -3.4 5.8 ▼ 5.7 4.4 ▲ 4.5
0 IMF2 2.8 -3.2 6.0 — 6.0 4.4 ▲ 4.9
World
2.5 -3.5 4.0 ▲ 5.6 3.8 ▲ 4.3
Bank3
-5
2019 2020 2021f 2022f Legend: 1 - latest as of September; 2 - latest as of July; 3 - latest as of June

Basic Source: Prepared by:

OECD, 2021; IMF, 2021; World Bank, 2021 SEC-ERTD

16. The ADB lowered its projection for Developing Asia's (DA) GDP growth rate to 7.1% in
September, down from 7.3% in April (Figure 3). Amidst the continuing COVID-19
pandemic, DA’s progress on vaccination remains behind the advanced economies’
rate. Vaccination coverage (fully vaccinated) in the United States and European Union
are at 51.8% and 58.0% respectively, while DA’s coverage trails behind at 28.7%.

17. The emergence of the Delta variant, mobility restrictions following the rise in cases, and
slow vaccination roll-out beleaguered Southeast Asia’s growth prospects. The 2021
growth outlook for the sub-region is down to 3.1% from 4.4%. In the Philippines, ADB
maintained its previous growth forecasts for 2021 and 2022, citing improvements in
domestic demand and optimistic global trade projections (ADB, 2021).

Figure 3. Developing Asia GDP Growth Forecast (% change y-o-y)

10 2019 2020 2021f 2022f

Previous Latest Previous Latest
5

DA 5.0 -0.1 7.3 ▼ 7.1 5.3 ▲ 5.4

0
SEA 4.5 -4.0 4.4 ▼ 3.1 5.1 ▼ 5.0
-5
PH 6.1 -9.6 4.5 — 4.5 5.5 — 5.5
-10
2019 2020 2021f 2022f Legend: DA - Developing Asia; SEA – Southeast Asia; PH - Philippines

Basic Source: Prepared by:

ADB, 2021 SEC-ERTD

SEPTEMBER 2021 | ISSUE NO. 9 4

SEConomics
A Monthly Publication of the Economic Research and Training Department

Global equities ended Q3 2021 flat;

PH
P
equities gained on positive domestic developments

US
Asia
Europe
PH

Basic Source: Figure 4. PH and Global Major Indices Weekly Movement

Bloomberg Finance L.P., 2021 September 2020 – September 2021 (normalized % change)

18. Despite recent advances, global equities lost ground in September, pulling down the
third-quarter results (Figure 4). U.S. stocks dropped as the Federal Reserve said it would
soon begin slowing its asset purchases, with the program expected to finish in mid-2022.
Rate hikes are also in the table but will likely happen after the asset purchase tapering.
Meanwhile, shares in Europe declined on inflation worries and slowing global economic
concerns. The European Central Bank also announced its asset purchase tapering but
offered no hints on any rate hikes. Asia equities, especially China, performed dismally
during the month as the Evergrande situation dampened investor sentiment. For some
markets, concerns on supply chain disruptions and inflation contributed to the decline
(T.RowePrice, 2021; J.P. Morgan, 2021; Nasdaq, 2021b; Reuters, 2021a; Reuters, 2021b).

19. Unlike some of its Asian neighbors, the PSE Index (PSEi) performed well in September.
Despite a slight decline in the last week of the month due to PH economy and lockdown
concerns, PSEi rose by 1.42% for the month supported by positive domestic news (Table
3). The persistent positive sentiment is supported by easing of quarantine restrictions,
recorded higher OFW remittances, and the slowdown of COVID-19 spread in the capital
region (PSE, 2021b; Business World, 2021b; Business World, 2021c; Reuters, 2021c;
Philippine News Agency, 2021d; BSP, 2021c).

Table 3. PSE Index Performance

as of September 2021
20. PSE welcomed another real estate
investment trust (REIT) to its roster.
Comparative
Close
Change (%)
Sponsored by Robinsons Land
m-o-m YTD Corporation, RL Commercial REIT, Inc.
PSEi 6,952.88 1.42 -2.62 (RCR), raised PHP23.53 Billion in its Initial
All Shares 4,325.84 2.37 1.25 Public Offering last 14 September. RCR
Financials 1,404.49 -1.63 -2.98 is the fourth listed REIT, and the biggest
Industrial 10,256.00 2.05 9.18 so far in terms of market capitalization
Holdings Firms 6,963.05 1.27 -5.32 and capital raised.
Property 3,024.21 -2.29 -17.47
Services 1,935.38 9.12 27.82 21. MREIT, sponsored by Megaworld Corp.,
Mining & Oil 9,281.90 0.62 -2.58 will follow suit as the fifth REIT IPO in the
Basic Source: Prepared by:
PSE, 2021 SEC-ERTD country (PSE, 2021c; PSE, 2021d).

SEPTEMBER 2021 | ISSUE NO. 9 5

SEConomics
A Monthly Publication of the Economic Research and Training Department

International tourism posts modest recovery;

51.4% of target PH tourism workers vaccinated
22. Although slight recovery was recorded in the first seven months of 2021, international
tourism is relatively above the low level in 2020 but remained much lower than in 2019
(Figure 5). This is also evident in the United Nation’s World Tourism Organization (UNWTO)
Panel of Experts' survey report released on the World Tourism Day celebration on 23
September 2021, which shows mixed outcomes for the period May-August 2021
(UNWTO, 2021a; United Nations, 2021; UNWTO, 2021b; Statista, 2021).

23. Following a slow start of 2021, foreign tourism improved slightly in June and July. The
reopening of numerous international destinations, especially in Europe and the
Americas, contributed to the relative improvement in tourist arrivals. As the travel
restrictions for vaccinated travelers eased, consumer trust was restored, and safe
mobility was revived in major tourist destinations across countries (Oxford Business
Group, 2021; Department of Tourism, 2021a).

24. With a 95% decline in foreign arrivals in January-July 2021 compared to the same period
in 2019, Asia and the Pacific continues to have the weakest tourism performance. Most
experts expect a recovery in 2022, mainly propelled by unleashed pent-up demand in
the second and third quarters. Almost one-third of those surveyed see a possible
comeback in 2023. Nearly half of all experts believe that foreign arrivals will only return
to 2019 levels in 2024 or later (WTTC, 2021a).

25. Of the target 245,338 tourism workers population in the Philippines, 126,097 or 51.4%
have been inoculated against COVID-19, bolstering optimism for a safe recovery of the
tourist industry. According to the Department of Tourism (DOT), the vaccination rate
stood at 99% for Metro Manila–based workforce in hotels and the DOT-accredited food
establishments, and 97% for the tour guides and tour operators (Department of Tourism,
2021b; Department of Tourism, 2021c; Philippine News Agency, 2021e).

Figure 5. International Tourist Arrivals (% of change) In the event of a slower-

than-anticipated recovery,
global GDP contribution of
travel and tourism sector
will only rise by around a
third.

In 2021, over 19 million

employment in travel and
tourism are at risk. By
2022, governments may
exceed 2019 job levels if
vaccination roll-outs are
sustained and herd
Source: World Tourism Organization, 2021 immunity is reached.

SEPTEMBER 2021 | ISSUE NO. 9 6

SEConomics
A Monthly Publication of the Economic Research and Training Department

COVID-19 to cost global economy USD 28 Billion by 2025;

PH losses to reach 41.4 Trillion pesos for next 40 years

26. The long-term scarring effects of the COVID-19 pandemic put a persistent downward
shift in potential global output level within the next decades. Moreover, the scale of
impact and depth of losses are expected to be uneven across economies. Emerging
market and developing economies are expected to have deeper scars in terms of
capital accumulation and productivity than advanced economies, driven by more
sectoral exposure to the pandemic shocks and relatively tempered policy response. In
Asia, COVID-19 threatens to inflict lasting scars not just through slower economic growth,
but also through rising inequality (IMF Working Paper, 2021; ERIA, 2021; ADBI, 2021; World
Bank; 2021b; Fuentes and Moder, 2021).

27. Global GDP was expected to expand by 2.5% in 2020 to USD86 Trillion, but instead shrank
by 4.3%. Recent estimate shows that the pandemic could amount to USD 10 Trillion in
forgone GDP over 2020-2021. The pandemic will cost the global economy USD 28 Trillion
in lost output by 2025 (NBER, 2021; OECD, 2021; Forbes, 2021; Economist, 2021; Oxford
Economics, 2021; Brookings, 2021; The Lancet, 2021; The Institute for Government, 2021;
WHO, 2020; The Guardian, 2020).

28. For the Philippines, the National Economic and Development Authority (NEDA)
estimates that the total long-run cost of the COVID-19 pandemic and the ensuing
lockdowns may reach PHP41 Trillion in net present values over the next four decades.
From this total, around PHP4.3 Trillion worth of output was foregone in 2020 while
additional PHP37 Trillion worth of lost output is seen in the next ten to forty years.

29. The NEDA projects a decrease in both consumption and investment in the next decade
due to lower demand in amusement, tourism, public transportation, and restaurants, all
of which require social distancing. Losses in private investments is projected to be the
largest at PHP21.3 Trillion. This would have the biggest impact on present and future
generations, followed by unrealized human capital investment gains at PHP 15.5 Trillion
and lower consumption at PHP4.5 Trillion worth of estimated losses. Resulting from these
demand-side losses are lower revenues from corporate, personal and value-added
taxes (NEDA, 2021).

30. PH economy is expected to converge at the pre-pandemic growth path by the 10th
year. However, risks remain as workers’ productivity is seen to be lower over the next 40
years (average number or working years per person), driven by untimely death, illness,
and lack of face-to-face schooling. To drive the PH economic recovery, the NEDA
proposes these three (3) key strategies:

[1] [2] [3]

Accelerating the Sustaining better risk Implementing the economic
vaccination management and the safe re- recovery program on
roll-out opening of the economy education, health, and human
capital development
Basic Source: NEDA, 2021

SEPTEMBER 2021 | ISSUE NO. 9 7

SEConomics
A Monthly Publication of the Economic Research and Training Department
Evergrande USD 300 Billion debt, worsening position
rattled Global financial markets
Timeline of the Evergrande Crisis
(Major Events)
November 2018
Evergrande was added to the list of highly indebted
conglomerates by China's central bank.
August 2020
Regulators announced caps for three different debt
ratios to tighten lending to the real estate sector.
March 2021
In a pre-IPO deal, Evergrande sold 10% of online real
estate and automobile marketplace Fangchebao to
17 investors for USD2.1 Billion.
June 2021
Evergrande was downgraded to 'B' from 'B+' by
Fitch, with a negative outlook.
Evergrande lowered interest-bearing debt to about
570 billion yuan from 716.5 billion yuan six months
ago, meeting one of regulators' debt ratio caps.
July 2021
Evergrande’s credit rating further downgraded:
“CCC+” from “B” by Fitch and B- from B+ with a
negative outlook by S&P.
At the request of China Guangfa Bank Co., a court
ordered to freeze a CNY132 Million bank deposit
held by Evergrande.
Some Hong Kong banks refused to give additional
loans to buyers of Evergrande's unfinished
residential projects.
August 2021
An advertiser sued the company for unpaid dues,
the first in numerous cases filed by nervous
subcontractors. Work at several construction sites
grinded to a halt.
Global rating companies including Moody's, Fitch,
and S&P further downgraded Evergrande's ratings
and outlook, making it harder for the troubled firm
to borrow money and raising fears of possible
bankruptcy.
September 2021
Evergrande announced being under "tremendous
pressure" and may not be able to meet its liabilities.
A 23 September 2021 deadline for paying interest
on a dollar bond passed without bondholders
being paid.
Basic Source:
Prepared by:
Reuters, 2021; FitchRatings, 2021 SEC-ERTD
Economic Times Realty, 2021;
Moody’s, 2021
SP Global, 2021; Bloomberg, 2021; WEF,
31. A success story during the housing boom in
2000s to 2010s, Evergrande flourished in the real
estate industry and had grown to own more
than 1,300 projects in 280 cities across China.
Outside housing, the company also has
expanded its business to electric cars, internet
and media, consumer products, and even a
soccer team.
32. With residential sales declining in recent years,
Evergrande the world’s most indebted property
developer, saw it debts balloon to over CNY2.0
Trillion (USD300 Billion), equivalent to around 2%
of China’s gross domestic product. The
company’s leverage levels worsened to the
point that China's central bank added
Evergrande to its list of highly indebted
conglomerates to watch in 2018.
33. Further worsening Evergrande’s position is the
“Three Red Lines” imposed by regulators in
2020. The policy, a trio of metrics used to
encourage the property industry to
deleverage, is seen as the immediate cause of
the company’s recent financial troubles.
34. With limits placed on borrowing, concerns on a
default mounted, and a collapse became
likely. Moreover, Evergrande’s financial
instability poses a systemic risk to China’s
financial system. Despite the company’s effort
to lift investor confidence, contagion fears
heightened after it was revealed that 128
banking institutions and 121 non-banking
institutions have linkage to Evergrande.
35. A most likely resolution would be a managed
restructuring which has financial and economic
implications in China. Although the common
perception is that an international contagion is
unlikely, the global stock market is keeping tabs
on possible developments.
Source: Reuters, 2021d; Business World; 2021d;
Evergrande, 2021; Bloomberg, 2021; Voxeu,
2021; The Wall Street Journal, 2021; World
Economic Forum, 2021; Quartz, 2021; Economic
Times Realty, 2021; World Economic Forum,
2021; Capital Economics, 2021a; Capital
Economics, 2021b; The Lens, 2021
SEPTEMBER 2021 | ISSUE NO. 9 8
SEConomics
A Monthly Publication of the Economic Research and Training Department
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SECONOMICS Editorial Team
Writers and Contributors
Jo-Dann N. Darong (Lead)
Kathlene Anne F. Famadico
Michaela Dale S. Robledo
Ma. Theresa C. Molod-Bersabal | Eleanor T. Dungo
Khen O. Enriquez
Editors
Asst. Director Violeta V. Infante
Director Rose Ann S. Espiritu
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gKHZDzCjoQFnoECBMQAQ&url=https%3A%2F%2Fwww.who.in
t%2Fdocs%2Fdefault-source%2Fcoronaviruse%2Fthe-human-
cost-of-covid-19-replacement-
11nov20.pdf%3Fsfvrsn%3D2aa9fb16_2%26download%3Dtrue&
usg=AOvVaw3RIW8teFLzM5e9f6mCmvVF
World Bank (2021a, June). Global Economic Prospects.
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Disclaimer: The SEConomics is not meant to provide financial and investment
advice. The Securities and Exchange Commission and the ERTD, in particular,
take no responsibility for any mistakes or omissions in the primary sources.
The economic analysis presented in this Issue are based on the selected
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research institutions, wherein any information and the links to references may
be changed by the original content creator anytime. The Editorial Team does
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SEPTEMBER 2021 | ISSUE NO. 9 11